full year results to 31 december 2015 · shopping centre valuations were $1.5bn higher, reflecting...

FULL YEAR RESULTS

TO 31 DECEMBER 2015

Scentre Group Limited ABN 66 001 671 496 All amounts in Australian dollars unless otherwise specified The financial information included in this release is based on the Scentre Group’s IFRS financial statements. Non IFRS financial information included in this release has not been audited or reviewed. This release contains forward-looking statements, including statements regarding future earnings and distributions that are based on information and assumptions available to us as of the date of this presentation. Actual results, performance or achievements could be significantly different from those expressed in, or implied by, these forward-looking statements. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this release. You should not place undue reliance on these forward-looking statements. Except as required by law or regulation (including the ASX Listing Rules) we undertake no obligation to update these forward-looking statements.

Scentre Group’s strategy is to create extraordinary places connecting and enriching communities by owning, managing and developing the best retail assets in Australia and New Zealand

Asset Management

Own the highest quality shopping centres and focus on maximising the operating performance of centres via ongoing portfolio review and development of long term asset plans

Developments

Invest in the Group’s centres at attractive total returns to ensure the assets continue to represent extraordinary retail spaces for retailers and shoppers

Capital Management

Focus on optimising cost of capital and maintaining conservatively positioned funding and liquidity

Retailer and Shopper Initiatives

Focus on the integration of food, fashion, leisure and entertainment experiences in each of its shopping centres to curate a retail environment that connects shoppers with our retail partners, goods and services that will resonate with the local community

STRATEGY

Since the establishment of Scentre Group: Asset Management - disposition of seven assets in Australia

and New Zealand; introduction of joint venture partner into five assets in New Zealand; resulting in further improvement in operating metrics of the pre-eminent portfolio of shopping centres in Australia and New Zealand

Developments - the Group has commenced projects of

$1.3bn, and has completed developments at Garden City, Miranda, Hurstville, Kotara, Chatswood and North Lakes (Stage 1) achieving IRRs of at least 15%.

Future development pipeline in excess of $3bn Capital Management - at 31 December 2015: gearing of

33.3% within target range of 30-35%; liquidity at $3.7bn; credit rating A1 (Stable) from Moody’s and A (Stable) from Standard and Poors; weighted average debt maturity 5.6 years; interest cover 3.5 times

Retailer and Shopper initiatives - recently-opened developments featured new experiential precincts and offerings for shoppers. In-house digital advertising network successfully launched with 1,200 SmartScreens providing retail and brand partners with a sophisticated promotional channel for brands and offers

Scentre Group - Full Year Results 2015 //

Key highlights for 2015 include:

Earnings – FFO of $1.199bn or 22.58 cents per security, representing growth of 3.8%, above previous market guidance of 3.5%.

• Strong underlying operating performance has more than offset the FFO earnings impact of asset sales

• Excluding the impact of transactions, underlying FFO increased by approximately 5%

Comparable NOI Growth of 2.6% above forecast range of 2.0 –

2.5% Commenced $830m (SCG share $583m) of developments in

2015 with four openings at Chatswood, Hurstville, Kotara and North Lakes all trading well. In 2016 has already commenced $495m (SCG share $425m) of developments at Chermside and North Lakes Stage 2

Shopping centre valuations were $1.5bn higher, reflecting growth in shopping centre NOI, increase in value post completion of developments and capitalisation rates firming by 38bp to 5.57%

2016 FFO forecast to increase by approximately 3% with

distribution forecast to increase by 2% to 21.3 cents per security. Underlying earnings increase approximately 5% if

full year impact of asset sales taken into account

HIGHLIGHTS

1. Assets under management at year end is pro forma post sale of 2 New Zealand assets 2. Comparable NOI growth for the 12 months to December 2015 is pro forma post sale of four

Australian assets and three New Zealand assets 3. Pro forma post sale of two New Zealand assets, gearing would be 32.3% 4. FFO/Contributed Equity

Overview 12 months to 31 December 2015

Assets Under Management 1 $42.1bn

Profit $2,708m

Funds from Operations (FFO) $1,199m

FFO per security 22.58 cents

Distribution per security 20.90 cents

Return on Contributed Equity 4 11.4%

Comparable NOI Growth 2 2.6%

Gearing 3 33.3%

Outlook 2016 Full Year Forecast

Funds from Operations Approximately 3% growth

Distribution per security 21.3 cents

2% growth

Comparable NOI growth 2.5 – 3.0%

Full Year Results 2015 //

FUNDS FROM

OPERATIONS FUNDS FROM OPERATIONS

$m 12 months to 31 December 2015

Net Property Income

- Australia 1,668

- New Zealand 156

Total Net Property Income 1,824

Management income 46

Project income 85

Gross income 1,955

Overheads (91)

EBIT 1,864

Net interest (499)

Earnings before Tax 1,365

Tax (72)

Minority interest (94)

Funds from Operations 1,199

DISTRIBUTION

$m 12 months to 31 December 2015

Funds from Operations 1,199

Retained earnings (89)

Distribution 1,110

Number of securities (million) 5,311.6

Funds from Operations per Security (cents) 22.58

Distribution per Security (cents) 20.90


BALANCE

SHEET BALANCE SHEET - PROPORTIONATE

$m 31 December 2015 31 December 2014

Cash 153 190

Property investments

- Shopping centres 29,513 28,920

- Development projects and construction in progress 565 374

Total Property investments 30,078 29,294

Assets held for sale 417 1,005

Deferred tax assets 83 98

Other assets 1,217 833

Total assets 31,948 31,420

Interest bearing liabilities

- Current 1,713 579

- Non-current 9,391 11,316

Finance lease liabilities 54 57

Deferred tax liabilities 236 314

Other liabilities 1,492 1,316

Total liabilities 12,886 13,582

Net Assets 19,062 17,838

Minority interest (1,422) (1,667)

Net Assets attributable to Scentre Group 17,640 16,171


OUR OPERATIONS

The portfolio remained in excess of 99.5% leased

2.6% Comparable NOI Growth for the 12 months to 31 December

Comparable Specialty Retail Sales Growth of 5.3% in Australia to $10,826 psm, and 6.6% in New Zealand to NZ$12,117 psm

17.8% Specialty Store Occupancy Cost

As at 31 December 2015 1 Australia New Zealand Total 2

Centres 34 6 40

Number of Retail Outlets 10,693 977 11,670

Gross Lettable Area (m sqm) 3.3 0.3 3.6

SCG Interest (bn) 3 $28.9 NZ$1.3 $30.1

JV Partner Interests (bn) 3 $11.0 NZ$1.1 $12.0

Assets Under Management (bn) 3 $39.9 NZ$2.4 $42.1

Weighted Average Capitalisation Rate 5.51% 6.98% 5.57%

1. Pro forma post sale of two New Zealand assets 2. Period end exchange rate AUD/NZD 1.0665 3. Includes construction in progress and assets held for development


COMPARABLE RETAIL SALES GROWTH

Pro forma post sale of four Australian assets and three New Zealand assets


COMPARABLE RETAIL SALES GROWTH

Pro forma post sale of four Australian assets and three New Zealand assets Total stable portfolio including mini majors and specialties


OPERATING PERFORMANCE

12 months to 31 December 2015 Australia New Zealand Total

Moving Annual Turnover (incl. GST) bn $20.6 NZ$1.9 $22.3

Specialty Store Retail Sales (incl. GST) (psm) $10,826 NZ$12,117 $10,867

Specialty Store Rent (psm) $1,606 NZ$1,289 $1,569

Comparable NOI growth 2.7% 0.9% 2.6%

Portfolio Leased >99.5%

Specialty Store Occupancy Cost 17.8%

Lease Deals Completed Number 2,432

Lease Deals Completed Area (sqm) 341,773

Pro forma post sale of four Australian assets and three New Zealand assets


The Group is undertaking pre-development activity on future development opportunities in excess of $3bn. Albany (NZ) Knox (VIC) St Lukes (NZ) Carousel (WA) Marion (SA) Tea Tree Plaza (SA) Coomera (QLD) Newmarket (NZ) Warringah Mall - Stage 2 (NSW) Innaloo (WA) Plenty Valley (VIC) Whitford City (WA)

PROJECT DETAILS ACTIVE PROJECTS Total

Project $m

SCG Share

$m

Project Yield Range

Anticipated Completion

Scentre Group

2016 Starts

Chermside 355 355 2017

North Lakes – Stage 2 140 70 2016

495 425

2015 Starts

Warringah Mall 310 155 2016

Casey Central 155 155 2016

465 310

960 735 7.0 - 7.5%

Third Party

Pacific Fair 670 - 2016

Total 1,630 735

- Commenced $830m of developments during 2015 (SCG share: $583m) - Completed developments at Hurstville, Chatswood, Kotara, North Lakes and Miranda during 2015 - 2016 commenced developments at Chermside and North Lakes with a combined value of $495m (SCG share: $425m)

FUTURE PIPELINE


Scentre Group - Full Year Results 2015 //

APPENDICES

Full Year Results 2015 // Page 11

DEVELOPMENTS

WESTFIELD CHERMSIDE

The $355m redevelopment of Westfield Chermside includes the construction of a second level gallery mall that will connect with the upper levels of Myer and David Jones department stores, and a new lifestyle and entertainment precinct. The gallery mall will be home to approximately 95 retailers including a number of large-format tenancies with local and international mini-major stores, providing a point of difference in the Brisbane market. More than 12 large restaurant tenancies and 13 small-format street food stores will form the basis of a lifestyle and entertainment precinct that links directly to an existing Event Cinemas complex with 2 Gold Class, 2 Vmax and 12 standard auditoriums. On completion of the redevelopment, which is the first major project since 2007, Westfield Chermside will be 156,643sqm retail GLA. The new gallery mall is scheduled to open in April 2017, with the entertainment and lifestyle precinct to follow some months after.

ACTIVE PROJECTS


DEVELOPMENTS

WESTFIELD NORTH LAKES - Stage 2

A $140m redevelopment of Westfield North Lakes is underway with the construction of a new 60-store retail mall that will link the new 29,000sqm IKEA-owned store currently under construction with the existing centre. The new retail mall will also be anchored by a Kmart discount department store and JB Hi-Fi HOME. The redevelopment will improve North Lakes’ customer offer, creating one of the most comprehensive retail centres in Brisbane’s north. Construction of the IKEA store is progressing on schedule and is due for completion in late 2016 to coincide with the opening of the new retail mall. On completion of the redevelopment Westfield North Lakes will be around 113,000sqm GLA. In November 2015 Stage 1 of Westfield North Lakes’ redevelopment opened with two new precincts – The Marketplace fresh food and The Laneway al fresco dining – as part of the $80m project, which also includes a brand new Event Cinemas complex due to open at Easter. The Stage 1 project included 17 new specialty retailers and a state-of-the-art children’s playground serving the centre’s local family-based community.

ACTIVE PROJECTS


DEVELOPMENTS

WESTFIELD WARRINGAH MALL

Construction at Westfield Warringah Mall is progressing well and on track to open in 2016. A new two-level parallel mall, anchored by a reconfigured Myer department store and large format mini-major retailers across both levels, will connect through to Woolworths on Level 1 and BIG W on Level 2. Myer’s reconfiguration and refurbishment is a key part of the $310m redevelopment with the former three-level 21,822sqm store to be transformed into a new two-level 15,000sqm store. Approximately 70 new retailers will be introduced to the centre, complemented by the refurbishment of the existing fresh food precinct. The project’s design will highlight the outdoor elements with a roof-top canopy providing ambience and protection over parts of the centre’s open areas. A number of dedicated spaces will be created for hosting events and installations. Westfield Warringah Mall will be 134,000sqm GLA on completion.

ACTIVE PROJECTS


DEVELOPMENTS

CASEY CENTRAL

Work is progressing well on the $155m project at Casey Central which is on track for completion with the first stage opening in March and final stage in September 2016. Casey Central, in which the Group acquired its initial interest in 2006, will transform from a small neighbourhood centre with a total GLA of 6,500sqm, 23 shops and a Coles to a 28,700sqm retail centre with northern and southern pavilions linked by a retail mall, a new full-line Coles supermarket adjacent to a fresh food precinct, a Woolworths supermarket (opening September), an Aldi supermarket and a new-format Target discount department store. Casey Central is located on a 10-hectare site in Narre Warren in Melbourne’s south-eastern growth corridor. On completion in September, Casey Central will comprise 84 retail stores and will also feature a casual dining precinct adjoining an external children’s play area.

ACTIVE PROJECTS


DEVELOPMENTS

WESTFIELD HURSTVILLE

In November 2015 Westfield Hurstville’s $105m redevelopment opened with a full refurbishment, an ambience upgrade and the introduction of ticketless parking. A highlight of the project is the rooftop dining and entertainment precinct which has a range of late-trading casual dining outlets. The new precinct links directly to the refurbished Event Cinemas that now features one of the largest Vmax screens in Australia. New retailers to the centre include a Woolworths supermarket, BIG W discount department store, JB Hi-Fi HOME, Cotton On Mega Store and Rebel Sport.

COMPLETED PROJECTS


DEVELOPMENTS

WESTFIELD CHATSWOOD In November 2015 the first stage of Westfield Chatswood’s $125m redevelopment opened with a new five-level mall on Victoria Avenue replacing the existing two-level mall, and a reconfiguration and upgrade of two levels of the existing multi-storey mall. The Asian dining market Hawker Lane also opened with 14 street-food style operators trading in an open kitchen late night environment. Hawker Lane links to an outdoor laneway decorated with public artwork and activated with food truck vendors. The redeveloped centre’s improved fashion offer features four new large-format tenancies including the newly opened Uniqlo and H&M stores, a relocated Rebel Sport and the flagship two-storey Topshop Topman facing Victoria Avenue. Existing major tenants Target and Hoyts are currently undertaking full refurbishments to their latest model stores. Around 45 new retailers, including the international mini-majors, have been added to the centre which has increased to 80,000sqm GLA. WESTFIELD KOTARA In November 2015 Westfield Kotara’s $55m redevelopment opened with a new rooftop dining and entertainment precinct set in an open-air landscaped garden space with nine restaurants and food outlets. The precinct has transformed Newcastle’s family entertainment options with a new eight-screen Event Cinemas complex with Gold Class and Vmax auditoriums, creating a genuine entertainment and lifestyle addition for the local community.

COMPLETED PROJECTS


DEVELOPMENTS

WESTFIELD MIRANDA

COMPLETED PROJECTS

Westfield Miranda opened in October 2014 with the launch of a gourmet fresh food market and a three-level galleria fashion mall and an al fresco dining precinct with nine restaurants, cafes and food operators set around a landscaped public space. Opening at the same time was the providore-style food market with 20 specialty suppliers, a state-of-the-art demonstration kitchen and the most comprehensive selection of fresh food in Sydney’s south, in an environment representing the very latest in food retail design. During 2015 a rooftop dining precinct with six restaurants opened, linking directly to the relocated ten-screen Event Cinemas complex with Gold Class and Vmax auditoriums. Later in the year a Coles supermarket was introduced to the centre, anchoring a fully refurbished fresh food precinct on Level 2. The project’s final precinct, in the former cinema space, is scheduled to open around Easter 2016 with the addition of Skyzone; Playtime and a range of family dining options. Westfield Miranda is now 129,000sqm GLA with an additional 100 specialty retailers on completion of the redevelopment.


FINANCING

FACILITIES FACILITIES

Diversified funding including bonds and bank facilities from 19 banks

As at 31 December 2015 with foreign currency bonds at fully hedged A$ equivalent face value

MATURITY PROFILE

Total Committed $14.0bn

Amount Drawn $(10.4)bn

Undrawn $3.6bn

Cash $0.1bn

Liquidity $3.7bn

LIQUIDITY


KEY RATIOS

86% Hedged at 31 December 2015 74% Hedged on average for next 3 years 1 INTEREST

HEDGING

PROFILE

KEY METRICS 31 December 2015

Gearing (look through basis) 33.3% 1

Weighted Average Debt Maturity 5.6 years

Investment Grade Ratings A1 (Stable) Moody's A (Stable) S&P

BOND COVENANTS Requirement 31 December 2015

Net Debt/ Net Assets Not greater than 65% 34.6% 2

Secured Debt/ Total Assets Not greater than 45% 0.7%

Interest Coverage At least 1.5 times 3.5 times 3

Unencumbered Leverage Not less than 125% 285%

31 Dec 1

$ FIXED RATE DEBT DERIVATIVES HEDGING FLOATING RATE $ & NZ$ DEBT

$ debt payable $ swap payable NZ$ swap payable NZ$ collar payable

$m Fixed Rate $m Fixed Rate NZ$m Fixed Rate NZ$m Strike Rates

2015 (1,380.0) 4.70% (7,122.5) 2.93% (435.0) 4.07% (70.0) 3.39%/5.25%

2016 (580.0) 3.25% (7,717.5) 2.92% (320.0) 4.00% (70.0) 3.39%/5.25%

2017 (580.0) 3.25% (7,508.5) 2.90% (230.0) 3.80% (70.0) 3.39%/5.25%

2018 (580.0) 3.25% (7,095.0) 2.89% (150.0) 3.62% (70.0) 3.39%/5.25%

2019 (430.0) 3.31% (5,730.0) 2.86% (150.0) 3.62% - -

2020 (430.0) 3.31% (3,960.0) 2.96% (100.0) 3.68% - -

2021 (30.0) 3.81% (2,260.0) 3.06% - - - -

2022 - - (750.0) 3.10% - - - -

1. On a pro forma basis post sale of two New Zealand assets gearing would be 32.3% 2. On a pro forma basis post sale of two New Zealand assets Net Debt/ Net Assets would be 33.7% 3. For the 12 months to 31 December 2015

1. As at 31 December 2015. All rates exclude borrowing margin


PROFIT

AND FFO PROFIT AND FFO

$m PROFIT 12 months to

31 December 2015

FFO Adjustments 1

FFO 12 months to

31 December 2015

Financial Statement Notes

A B C=A+B

Net Property Income

- Australia 1,632 36 1,668 Note 4(a)(iv)

- New Zealand 154 2 156 Note 4(a)(iv)

Total Net Property Income 1,786 38 1,824 Note 4(a)(iv)

Management income 2 46 - 46

Project income 3 85 - 85

Gross income 1,917 38 1,955

Overheads (91) - (91) Note 4(a)(i)

Revaluations 1,539 (1,539) - Note 4(a)(i)

Gain in respect of capital transactions 19 (19) - Note 4(a)(i)

EBIT 3,384 (1,520) 1,864

Net interest 4 (613) 114 (499)

Currency derivatives 103 (103) - Note 4(a)(i)

Earnings before Tax 2,874 (1,509) 1,365

Tax (38) (34) (72) Note 4(a)(i), Note 9, Note 16(a)

Minority interest 5 (128) 34 (94)

Profit after Tax/ Funds from Operations 2,708 (1,509) 1,199

Retained earnings (89)

Distribution 1,110

1. FFO adjustments relate to revaluations, mark to market of interest rate and currency derivatives, tenant allowance amortisation, deferred tax benefit and gain on sale of capital

transactions. 2. Management income $57m less management expenses $11m = $46m. 3. Project income $683m less project expenses $598m = $85m. 4. Financing costs $727m (Note 4(a)(i)) less interest income $8m (Note 4(a)(i)) less interest expense on other financial liabilities $81m (Note 7) less net fair value loss on other financial liabilities $25m (Note 7) = $613m.

5. Minority interest $22m (Note 4(a)(i)) plus interest expense on other financial liabilities $81m (Note 7) plus net fair value loss on other financial liabilities $25m (Note 7) = $128m.


BALANCE

SHEET

BALANCE SHEET PROPORTIONATE 1

$m Consolidated Equity Accounted 31 December 2015

A B C=A+B

Cash 143 10 153

Property investments

- Shopping centres 27,161 2,352 29,513

- Development projects and construction in progress

494 71 565

Total Property investments 27,655 2,423 30,078

Assets held for sale 417 417

Equity accounted investments 2,333 (2,333) -

Deferred tax assets 83 - 83

Other assets 1,211 6 1,217

Total assets 31,842 106 31,948

Interest bearing liabilities

- Current 1,713 - 1,713

- Non-current 9,391 - 9,391

Finance lease liabilities 39 15 54

Deferred tax liabilities 180 56 236

Other liabilities 1,457 35 1,492

Total liabilities 12,780 106 12,886

Net Assets 19,062 - 19,062

Minority interest 2 (1,422) - (1,422)

Net Assets attributable to Scentre Group 17,640 - 17,640

1. Period end AUD/NZD exchange rate 1.0665 at 31 December 2015

2. Includes $1,155m of Property Linked Notes shown in minority interest given their equity characteristics, and $267m relating to Carindale


full year results to 31 december 2015 · shopping centre valuations were $1.5bn higher, reflecting...

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